SEALED v. SEALED

Filing 82

MEMORANDUM OPINION AND ORDER re 38 MOTION to Dismiss RELATORS' FIRST AMENDED COMPLAINT BASED ON IMPROPER VENUE PURSUANT TO FED. R. CIV. P. 12(B)(3), OR IN THE ALTERNATIVE, TO TRANSFER VENUE filed by Ameriteam Services, L.L.C., Team Health, Inc., Team Health Holdings, Inc., Team Finance, L.L.C... Signed by District Judge Rodney Gilstrap on 8/21/2019. (nkl, )

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF TEXAS
MARSHALL DIVISION
UNITED STATES OF AMERICA,
CALEB HERNANDEZ & JASON
WHALEY, RELATORS; ET AL.;

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Plaintiffs,
v.
TEAM FINANCE, L.L.C., TEAM
HEALTH, INC., TEAM HEALTH
HOLDINGS, INC., AMERITEAM
SERVICES, L.L.C.,

CIVIL ACTION NO. 2:16-CV-00432-JRG

Defendants.
MEMORANDUM OPINION AND ORDER
Before the Court is Defendants Team Health Holdings, Inc., Team Finance, LLC, Team
Health, Inc., and AmeriTeam Services, LLC’s Motion to Dismiss Relators’ First Amended
Complaint Based on Improper Venue Pursuant to Fed. R. Civ. P. 12(b)(3), or in the Alternative,
to Transfer Venue (the “Motion”). (Dkt. No. 38.) The Court held an evidentiary hearing on the
Motion on July 24, 2019. (Dkt. No. 73.) Having considered the parties’ briefing, the record
evidence, and the relevant authorities, the Court DENIES the Motion for the reasons described
herein.
I.

BACKGROUND
On April 25, 2016, Relators Caleb S. Hernandez and Jason W. Whaley (collectively,

“Relators”) filed suit against Defendants Team Health Holdings, Inc. (“THHI”), Team Finance,
LLC (“TF”), and Team Health, Inc. (“THI”) under the qui tam provisions of the Federal False
Claims Act, 31 US.C. §§3729 et seq. (“FCA”), and analogous state statutes. (Dkt. No. 1

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(complaint).) 1 On June 28, 2018, the United States of America and the Plaintiff state governments
declined to intervene. (Dkt. No. 20.) Relators subsequently amended the Complaint on November
12, 2018 to add AmeriTeam Services, LLC (“AmeriTeam”) as a defendant to the action. (Dkt.
No. 33 (First Amended Complaint).)
The following introductory paragraphs from Relators’ First Amended Complaint
succinctly summarize the respective parties in this action as well as Relators’ key allegations
against the Defendants:
1. TeamHealth is an emergency room management company that operates hospital
emergency departments across the nation. TeamHealth provides staffing,
operation, and billing services to emergency departments as an outside contractor,
promising to increase efficiency and profitability in exchange for a share of the
emergency departments’ earnings. TeamHealth emergency departments frequently
render healthcare services to beneficiaries of public healthcare programs
administered by the Centers for Medicare and Medicaid Services (“CMS”) and the
Plaintiff States. This case is about two fraudulent schemes (the “Schemes”) that
TeamHealth has used for years to obtain grossly overpaid reimbursements from
these public healthcare programs.
2. The first Scheme is the “Mid-Level Scheme.” Under the Mid-Level Scheme,
TeamHealth overbills for services provided by “mid-level” practitioners. The term
“mid-level” refers to non-physician healthcare providers, such as Physician
Assistants (“PAs”) and Nurse Practitioners (“NPs”). Under CMS rules, a midlevel’s services are reimbursed at 85% of the standard physician rate, while services
rendered by a physician are reimbursed at 100% of the standard physician rate. . . .
3. . . . TeamHealth—through its billing policies, procedures, and protocols (which
include training and guidelines), and through its coordinated operation and
influence over its subsidiaries and affiliated professional entities—systematically
submits claims for mid-level services. . . triggering the 100% rate when in fact the
85% rate applied. TeamHealth does this intentionally and has done so for years. .
...
7. The second Scheme is the “Critical Care Scheme.” This Scheme is a classic
upcoding scheme. Under the Critical Care Scheme, TeamHealth bills CMS for
“critical care”—the highest level of emergency treatment—when in fact critical

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Relators sued Defendants on behalf of the following state governments: Connecticut, Florida,
Georgia, Indiana, Louisiana, Massachusetts, Tennessee, and Texas. (Dkt. Nos. 1, 33.)
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care services were not rendered and/or were not medically necessary, thereby
submitting false claims through fraudulent billing. . . . .
10. Relator CALEB S. HERNANDEZ, D.O., is a citizen of the United States of
America and is a resident of the State of New York. . . . He brings this qui tam
action based upon direct and unique information he obtained during his
employment at the following hospital emergency departments managed and/or
operated by TeamHealth: the North Colorado Medical Center in Greely, Colorado
(from 2011 to 2015); Sterling Regional Medical Center in Sterling, Colorado (from
2013 to 2015); and Juan Luis Phillipe Hospital in St. Croix, United States Virgin
Islands (in 2010). . . .
11. Relator JASON W. WHALEY, PA-C, is a citizen of the United States of
America and is a resident of the State of Colorado. . . . He brings this qui tam action
based upon direct and unique information obtained during his employment at the
emergency department at North Colorado Medical Center, located in Greeley,
Colorado (from 2011 to 2013), which was and is operated and/or managed by
TeamHealth. . . .
12. Defendants are a system of affiliated entities operating as and collectively
referred to herein as “TeamHealth.” TeamHealth is a national healthcare practice
management company that is one of the largest suppliers of outsourced physician
staffing and administrative services to hospitals in the United States. TeamHealth
operates in at least forty-seven states and employs at least 13,000 healthcare
professionals.
13. Defendant, TEAM HEALTH HOLDINGS, INC., is a corporation that is
organized under the laws of Delaware and has its principal place of business in
Knoxville, Tennessee. Team Health Holdings, Inc. was acquired in 2017 in a $6.1
Billion take-private deal. Team Health Holdings, Inc. professes to be a holding
company that conducts no operations, with no employees. Further, Team Health
Holdings, Inc. claims its only material asset(s) to be its membership interests in
Team Finance, L.L.C.
14. Defendant, TEAM FINANCE, L.L.C. is a subsidiary of Team Health Holdings,
Inc. that is organized under the laws of Delaware. Because Team Finance, L.L.C.
takes the citizenship of its member, Team Health Holdings, Inc., it is likewise a
citizen of the States of Delaware and Tennessee.
15. Defendant, TEAM HEALTH, INC., is a subsidiary of Defendant Team Health
Holdings, Inc., and does business under the name of “TEAMHEALTH.” Team
Health, Inc. is a Delaware corporation with its principle place of business at 265
Brookview Centre Way, Suite 400, Knoxville, Tennessee. Although—as of
October of 2014—it has claimed to be a holding company that conducts no
operations and has no employees, Team Health, Inc., alone or through its

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subsidiaries, has carried out operations and employed employees within the
TeamHealth system.
16. Defendant, AMERITEAM SERVICES, L.L.C., is [a] Tennessee Limited
Liability Company and is an administrative and support services subsidiary of
Defendant Team Health Holdings, Inc., which employs officers and other
TeamHealth affiliated representatives, including those who are members of the
referenced departments, committees and TeamHealth’s purported [FCA]
Compliance Advisory Group. Its principal place of business and mailing address
is 265 BROOKVIEW CENTRE WAY, STE 400 KNOXVILLE, TN 37919-4052
USA—the same address as the other TeamHealth defendants. It does business
under the name of “TEAMHEALTH.” It was created in Tennessee in October 2014
and reportedly has one member, Tennessee Parent, Inc., which Blackstone created
to facilitate the take-private deal.
(Dkt. No. 33 ¶¶ 1–16 (emphasis in original).)
II.

DISCUSSION
A. Venue Is Proper in this District
Defendants move to dismiss Relators’ First Amended Complaint for improper venue under

Federal Rule of Civil Procedure 12(b)(3). (Dkt. No. 38.) In resolving a motion to dismiss for
improper venue, the Court may consider both the complaint and evidence outside the complaint.
See Trois v. Apple Tree Auction Ctr., Inc., 882 F.3d 485, 493 (5th Cir. 2018) (“[T]he court is
permitted to look at evidence in the record beyond simply those facts alleged in the complaint and
its proper attachments.”) (quoting Ambraco, Inc. v. Bossclip B.V., 570 F.3d 233, 237 (5th Cir.
2009)); Kranos IP Corp. v. Riddell, Inc., No. 2:17-cv-00443, 2017 WL 3704762, at *2 (E.D. Tex.
Aug. 28, 2017); see also 14D Wright & Miller, Federal Practice & Procedure § 3826 (4th ed.
2017). The Court must accept all well-pleaded and uncontroverted facts as true and resolve any
factual conflicts in the plaintiff’s favor. See Trois, 882 F. 3d at 492–93; but see U.S. ex rel. Riley
v. St. Luke’s Episcopal Hosp., 355 F.3d 370, 377 (5th Cir. 2004) (“If such an allegation is
contradicted by the contents of an exhibit attached to the pleading, then indeed the exhibit and not
the allegation controls.”). “Once a defendant raises improper venue by motion, ‘the burden of
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sustaining venue will be on [the] Plaintiff.’” Rex Real Estate I, L.P. v. Rex Real Easter Exchange,
Inc., No. 4:18-cv-00371, 2019 WL 2524830, at *1 (E.D. Tex. June 19, 2019) (internal citation
omitted); see also Gutierrez v. Drill Cuttings Disposal Co., L.L.C., 319 F. Supp. 3d 856, 861 (W.D.
Tex. 2018) (“Once challenged, the burden of sustaining venue lies with the plaintiff.”).
An action under the FCA “may be brought in any judicial district in which the defendant
or, in the case of multiple defendants, any one defendant can be found, resides, transacts business,
or in which any act proscribed by section 3729 occurred.” 31 U.S.C. § 3732(a); see also 28 U.S.C.
§ 1391(a)(1) (“Except as otherwise provided by law, this section shall govern the venue of all civil
actions brought in the district courts of the United States.”) (emphasis added); United States ex rel
Cook-Reska v. Cmty. Health Sys, Inc., No. H-09-1565, 2014 WL 5500710, at *4 (S.D. Tex. Oct.
30, 2014) (identifying 31 U.S.C. § 3732(a) as the venue provision for the FCA). Relators allege
that venue is proper because “(a) Defendants transact business here; (b) acts proscribed by the
FCA occurred here; and/or (c) Defendants reside here.” (Dkt. No. 53 at 1.) Relators rely on, inter
alia, the following factual allegations to support each of these contentions:
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“TeamHealth is an emergency room management company that operates hospital
emergency departments across the nation. . . . TeamHealth emergency departments
frequently render healthcare services to beneficiaries of public healthcare programs
administered by the Centers for Medicare and Medicaid Services (‘CMS’) and the
Plaintiff States.” (Dkt. No. 33 ¶ 1.)

•

“Specifically, during the relevant time period, TeamHealth has transacted business
with and/or on behalf of at least the following hospital emergency departments
located within the Eastern District of Texas: (1) the Christus St. Mary Hospital in
Port Arthur, Texas; (2) the Longview Regional Hospital in Longview, Texas; and
(3) Methodist Urgent Care in The Colony, Texas.” (Id. ¶ 21.)

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“TeamHealth—through its billing policies, procedures, and protocols (which
include training and guidelines), and through its coordinated operation and
influence over its subsidiaries and affiliated professional entities—systematically
submits claims for mid-level services under various physicians’ NPIs (as assigning
charts to a physician by a midlevel is usually based on shift assignments and how
shifts overlap), triggering the 100% rate when in fact the 85% rate applied.
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TeamHealth does this intentionally and has done so for years.” (Id. ¶ 3; see also
id. ¶¶ 39–74 (supporting factual allegations).)
•

“TeamHealth systemically perpetrates the Mid-Level Scheme nationwide and
extends to and through all TeamHealth subsidiaries and affiliated entities. It is
operated, administered, and supported throughout all of the Team Health Holdings,
Inc. subsidiaries and affiliated entities through the subsidiaries Team Health Inc.
and AmeriTeam Services LLC and their subsidiaries. Relators observed the exact
same policies regarding Mid-Level charting and physician countersignatures at
every TeamHealth emergency department that employed them. The uniform nature
of the Mid-Level Scheme is also corroborated by former TeamHealth employees,
including CW1 and CW2.” (Id. ¶ 73.)

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“TeamHealth bills CMS for ‘critical care’—the highest level of emergency
treatment—when in fact critical care services were not rendered and/or were not
medically necessary, thereby submitting false claims through fraudulent billing. . .
.” (Id. ¶¶ 7–8; see also id. ¶¶ 39–43, 75–95 (supporting factual allegations).)

•

“Relators observed the same policies with respect to critical care at every
TeamHealth emergency department they have worked in . . . It is evident that the
Critical Care Scheme is a company-wide policy. National and regional
TeamHealth administrators often send emails to TeamHealth physicians and MidLevels instructing and reminding them of TeamHealth’s critical care policy.” (Id.
¶¶ 93, 95.)
Relators argue that since the FCA prohibits anyone who “knowingly . . . causes to be made

. . . a false record or statement material to a false or fraudulent claim,” (Dkt. No. 53 at 9 (emphasis
in original and quoting 31 U.S.C. § 3732(a)(1)(B)), FCA liability attaches to all who participated
in the alleged scheme “without regard to ‘who actually submitted the claim forms’” to the
government for reimbursement. (Id. (quoting U.S. ex rel. Riley v. St. Luke’s Episcopal Hosp., 355
F.3d 370, 378 (5th Cir. 2004).) Relators contend that the foregoing allegations demonstrate that
Defendants caused TeamHealth-affiliated healthcare providers to falsify medical records—both in
this District, e.g., Longview Regional Hospital, and nationwide—that were then used to generate
bills submitted for reimbursement to the government. (Id. at 10, 12.) As a result, Relators submit

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that venue is proper because they have plead sufficient facts showing that an “an[] act proscribed”
by the FCA occurred here and that Defendants “transact business” here. (Id. at 12, 19.) 2
Relators further argue that Defendants have failed to controvert any of these allegations,
and that the parties’ venue discovery only reinforces this conclusion. (Id. at 10–11, 15–19.) To
support venue on the basis that “any act proscribed” by the FCA occurred here, Relator Hernandez
submitted a declaration, in which he discusses (1) “[the] ways in which Defendants required
Relators to commit acts that resulted in the false records for the Mid-Level [] and Critical Care
[Schemes];” (id. at 11), (2) “acts [he] was required to perform at TeamHealth’s direction at the
local or facility level;” (id. at 12 n.7), and (3) “the many reasons why [he] believes and concludes
that TeamHealth directs the same acts and conduct nationwide, including in this district.” (id.)
(See also Dkt. No. 53-3 (Relator Hernandez’s Declaration in support of Relator’s Opposition to
Defendants’ Motion).)
Relators also contend that venue discovery uncovered facts showing that at least one of the
Defendants “transacts business” in this District. (Id. at 12–19.) Relators specifically identify,
inter alia, the following evidence: (1) TeamHealth recruits emergency physicians in Longview,
Texas, (Dkt. Nos. 73-7 (LinkedIn profile of TeamHealth recruiter for Texas), 73-8 (job posting for
TeamHealth emergency physician in Longview, Texas); 73-13 (job posting for TeamHealth postacute care physician in Longview, Texas)); (2) Health Care Financial Services, LLC (“HCFS”), a
TeamHealth subsidiary, coded and billed for emergency department services rendered at
Longview Regional Hospital, (Dkt. No. 73-3 ¶ 9 (Declaration of Paula Dearolf, Executive Vice

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Relators also argue that venue is proper because Defendants “reside” in this District because
“Defendants have transacted business and . . . violated the FCA in this district.” (Dkt. No. 53 at
22.) According to Relators, Defendants concede residency in this District because they failed to
formally move under Federal Rule of Civil Procedure 12(b)(2). (Id. at 19–20.) Since the Court
finds that venue is otherwise proper, the Court need not address these alternative arguments.
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President of Revenue Cycle Operations at HCFS, in support of Defendants’ Motion), Dkt. No. 53
at 15–17 (citing deposition transcript of John Stair)); (3) John Stair, an executive employed by
Defendant AmeriTeam, serves as secretary for HCFS, (Dkt. No. 73-10 (Texas Franchise Tax
Public Information Report for HCFS)); (4) TeamHealth requires all affiliated clinicians to
complete TeamHealth’s compliance training nationwide, (Dkt. No. 53 at 17 (citing deposition
transcript of John Stair)); and (5) TeamHealth-affiliated entities in Texas, such as physician
practice groups, report to executives at AmeriTeam, (id. at 18 (citing deposition transcript of John
Stair)).
Defendants disagree and assert that venue is improper in this District. (Dkt. No. 38.) 3
Specifically, Defendants argue that: (1) each Defendant is a corporate resident of either Delaware
or Tennessee, and each maintains a principle place of business in Tennessee, (id. at 8); (2)
Defendants THHI and TF are holding companies and conduct no business activities, (id. at 6); (3)
none of the Defendants have any contracts for the provision of emergency department clinician
staffing or other services with any healthcare facilities in this District, (id. at 6–7; Dkt. No. 56 at
2–3); (4) non-party Quantum Plus, LLC (“Quantum”) provides staffing and management services
for Longview Regional Medical Center and none of the Defendants have any role in that contract,
(Dkt. No. 56 at 3); and (5) non-party HCFS is the billing subsidiary for TeamHealth, and conducts
all coding and billing for any services rendered in this District in one of its three centers in
Tennessee, Ohio, or Florida, (Dkt. No. 38 at 4–5; Dkt. No. 56 at 3, 5, 7–9).
Defendants also argue that the activities of Quantum or HCFS cannot be attributed to
Defendants to establish venue. (Dkt. No. 56 at 3–7.) According to Defendants, Relators have

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Defendants incorrectly argued that venue was improper under 28 U.S.C. § 1391. (Dkt. No. 38.)
However, Defendants did properly analyze venue under the correct statute in their reply brief and
at the evidentiary hearing held on July 24, 2019. (Dkt. Nos. 56, 73.)
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failed to show that Defendants are liable under a veil piercing or an alter ego theory, and evidence
of “common board members, use of a website, a universal corporate Code of Conduct and a single,
conclusory statement that AmeriTeam ‘manages’ affiliated corporations through those common
board members and employees are insufficient” to make this showing. (Id. at 4.)
In light of the record evidence and the parties’ arguments, the Court finds that venue is
proper in this District. At the evidentiary hearing, the Court heard testimony from John Stair, the
Chief Operations Counsel of Defendant AmeriTeam, (Dkt. No. 78 at 6:8–22 (Transcript of July
24, 2019 evidentiary hearing)), that establishes that at least one defendant “transacts business” in
this District.

In particular, Mr. Stair testified to the following: (1) AmeriTeam provides

administrative support services to local practice groups that work in this District, (id. at 12:1–19,
37:1–3); (2) AmeriTeam “set[s] compliance policies that are then utilized throughout the
organization” (id. at 13:14–21), and “physicians working in the Emergency Department at
Longview Regional, which is contracted with [sic] Team Health entity, have gone through Team
Health’s compliance training,” (id. at 14:11–14: see also id. at 14:18–19), (3) TeamHealth recruits
emergency physicians in Longview, Texas, and the job postings are listed on a TeamHealth
website that is created and maintained by AmeriTeam, (id. at 18:1–8, 19:24–20:2, 21:4–7, 35:21–
24, 36:10–23); (4) AmeriTeam procures malpractice insurance for physicians working at
TeamHealth affiliated hospitals in this District, (id. at 24:21–25:1, 25:22–25); (5) TeamHealth
creates policies in Knoxville, Tennessee that are implemented nationwide in all TeamHealth
affiliated facilities, including those in this District, (id. at 29:23–30:3, 30:11–14); (6) at least one
defendant “may have a contract with the operating subsidiary that supports the Longview
hospital,” (id. at 34:4–7); and (7) Mr. Stair, an executive of AmeriTeam, is also a manager of

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Quantum, an entity owned by one of the defendants and that has a contract with Longview
Regional Hospital, (id. at 39, 17–29, 39:23–40:10.).
Courts in other cases have found venue under similar facts. See In re DRC, Inc., 358 Fed.
Appx. 193, 194 (D.C. Cir. 2009) (per curiam) (affirming district court’s decision that Petitioner
“transacts business” under the FCA venue statute because “Petitioner had numerous business
dealings with federal entities headquartered in the District of Columbia”); United States ex rel.
Grand v. Northrop Corp., 811 F. Supp. 330, 331 (S.D. Oh. 1992) (finding that Northrop “transacts
business” in the district under the FCA venue statute because Northrop was responsible for
overseeing business activities that were conducted by its subcontractor in the District). 4
B. Leave Is Granted to Amend the Complaint
Relators alternatively argue that “even if TeamHealth did not technically transact business
in the Eastern District of Texas, [Defendants] admit[] that [their] subsidiaries absolutely did.”
(Dkt. No. 57 at 6.) Relators contend that “the appropriate remedy would not be dismissal for lack
of proper venue,” but rather to grant “leave to [allow Relators] to make minor amendments to the
Complaint to add the subsidiaries TeamHealth has identified.” (Id.)

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While not expressly raised under Federal Rule of Civil Procedure 12(b)(6), Defendants also argue
that this Court lacks personal jurisdiction over the Defendants. (Dkt. No. 56 at 8–11.) The Court
finds that all Defendants maintain systematic contacts with Texas such that the exercise of personal
jurisdiction would not offend traditional notions of fair play and substantial justice. See Int’l Shoe
Co. v. State of Wash., Office of Unemployment Comp. & Placement, 326 U.S. 310, 316 (1945);
Johnston v. Multidata Sys. Int’l Corp., 523 F.3d 602, 609 (5th Cir. 2008). At the evidentiary
hearing, the Court heard testimony from Mr. John Stair, Chief Operations Counsel for Defendant
AmeriTeam, that shows that Defendants purposefully avail themselves of doing business in Texas,
including in this District. (Dkt. No. 78 at 15:8–16:23 (explaining that Texas is a “key jurisdiction
for Team Health’s business” and that while the Defendants themselves are not incorporated or
have headquarters in Texas, Defendants conduct business in Texas through local practice groups),
34:14–24 (explaining that TeamHealth wants local practice groups to use its brand name to recruit
physicians in Texas).)
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Even though venue is otherwise proper, the Court finds that amending the complaint is
appropriate. The alleged schemes concern Defendants’ coding and billing practices. (Dkt. No. 78
at 30:8–10 (Transcript of July 24, 2019 evidentiary hearing).) HCFS is a TeamHealth subsidiary
and “performs the actual coding and billing services for (‘Emergency Department’) ED patient
encounters provided by [TeamHealth] affiliated clinicians.” (Dkt. No. 38-3 ¶ 4 (Declaration of
Paula Dearolf on Behalf of Defendants); see also Dkt. No. 78 at 43:5–8, 44:7–11.) Defendants
admit that the Akron, Ohio billing center for HCFS coded and billed for emergency department
services performed by TeamHealth affiliated clinicians at Longview Regional Hospital. (Dkt. No.
38-3 ¶ 9; see also Dkt. No. 78 at 44:18–20, 63:1–17, 77:13–21.) There is no doubt HCFS “transacts
business” in this District or that its role in Defendants’ business will be relevant to Relators’ casein-chief. Accordingly, the Court grants Relators leave to amend the complaint to add HCFS as a
co-defendant.
C. Transfer Is Not Appropriate Under 28 U.S.C. § 1404(a)
Defendants also move to transfer this case to the Eastern District of Tennessee under 28
U.S.C. § 1404(a). (Dkt. No. 38.) Section 1404(a) provides that “[f]or the convenience of parties
and witnesses, in the interest of justice, a district court may transfer any civil action to any other
district or division where it might have been brought.” 28 U.S.C. § 1404(a). A party seeking
transfer under § 1404(a) must show that transfer is “clearly more convenient” than the venue
chosen by the plaintiff. In re Volkswagen of Am., Inc., 545 F.3d 304, 315 (5th Cir. 2008)
[hereinafter Volkswagen II]. When deciding such a motion, the court may consider undisputed
facts outside of the pleadings, such as affidavits or declarations, and must resolve all factual
conflicts in favor of the non-moving party. See Sleepy Lagoon, Ltd., v. Tower Grp., Inc., 809 F.

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Supp. 2d 1300, 1306 (N.D. Okla. 2011); see also Cooper v. Farmers New Century Ins. Co., 593
F. Supp. 2d 14, 18–19 (D.D.C. 2008).
i. Venue Is Proper in the Proposed Transferee Forum
The first inquiry in the § 1404(a) analysis is “whether the judicial district to which transfer
is sought would have been a district in which the claim could have been filed.” In re Volkswagen
AG, 371 F.3d 201, 203 (5th Cir. 2004) [hereinafter Volkswagen I]. As stated above, venue is
proper in FCA cases in any judicial district in which any one defendant “can be found, resides,
transacts business, or in which any act proscribed by [S]ection 3729 occurred.” 31 U.S.C. §
3732(a). Since each of the Defendants is incorporated, or has its principle place of business, in
Knoxville, Tennessee, the Court finds that this case could have been properly filed in the Eastern
District of Tennessee. (Dkt. No. 33 ¶¶ 13–16.)
ii. The Private and Public Interest Factors Do Not Warrant Transfer
Once the threshold inquiry is met, the court then weighs various private and public factors.
Volkswagen I, 371 F.3d at 203; In re Nintendo Co., Ltd., 589 F.3d 1194, 1198 (Fed. Cir. 2009)
(applying Fifth Circuit law). These factors “are not necessarily exhaustive or exclusive,” and no
single factor is dispositive. Volkswagen II, 545 F.3d at 314–15.
1. Private Interest Factors
a. Relative Ease of Access to Sources of Proof
When considering the relative ease of access to sources of proof, a court looks to where
documentary evidence, such as documents and physical evidence, are stored. Volkswagen II, 545
F.3d at 316. For this factor to weigh in favor of transfer, Defendants must show that transfer to
the Eastern District of Tennessee will result in more convenient access to sources of proof. See

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Diem LLC v. BigCommerce, Inc., No. 6:17-cv-186, 2017 WL 6279907, at *2 (E.D. Tex. Dec. 28,
2017).
Defendants argue that this factor favors transfer because “a great majority of the evidence
. . . would either be located in or more easily accessible in Knoxville, Tennessee.” (Dkt. No. 38 at
12.) HCFS allegedly performs “the actual coding and billing services” at issue in this case, and
HCFS’s records are “securely stored . . . and retrievable in bulk only from Knoxville, Tennessee.”
(Id. at 12–13.) Defendants also explain that its headquarters are in Knoxville, Tennessee, and so
any documents relating to “[o]verall business decisions,” such as the creation of policies on coding,
“submissions to governmental and non-governmental payors, and [the] maintenance and
management of medical records” are also located there. (Id. at 13.)
Relators argue that this factor does not favor transfer because the alleged schemes involve
false records created in several states, including in this District. (Dkt. No. 53 at 23.) “Relator
Hernandez identifies [various] . . . records and evidence maintained at the local level” that would
be relevant to this case. (Id.) These include “personnel files of non-party physicians and midlevel providers” and “emails and documents” relating to Defendants’ coding policies and
procedures. (Id.) Relators also argue that “much of this data is in the hands of the federal
government” and that any documents from Defendants can easily be retrieved electronically from
Tennessee. (Id. at 23–24.)
Relators accuse Defendants of falsely coding medical records that are then used to generate
bills for reimbursement to Medicare/Medicaid. According to Ms. Dearolf, the Executive VicePresident of Revenue Cycle Operations at HCFS, any documents relating to Defendants’ coding
and billing practices are physically stored in and can only be accessed in the transferee forum.
(Dkt. No. 38-3 ¶ 15 (Declaration of Paula Dearolf on Behalf of Defendants).) Even though

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Relators identify potentially relevant documents in other jurisdictions, the vast majority of relevant
documents will likely be located at Defendants’ headquarters in Knoxville, Tennessee. 5
Accordingly, the Court finds that this factor weighs slightly in favor of transfer.
b. Availability of Compulsory Process
The second private interest factor instructs the Court to consider the availability of
compulsory process to secure the attendance of witnesses, particularly non-party witnesses whose
attendance may need to be secured by a court order. In re Volkswagen II, 545 F.3d at 216. A
district court’s subpoena power is governed by Federal Rule of Civil Procedure 45. For purposes
of § 1404(a), there are three important parts to Rule 45. See Virtual Agility, Inc. v. Salesforce,
Inc., No. 2:13-cv-00011, 2014 WL 459719, at *4 (E.D. Tex. Jan. 31, 2014) (explaining 2013
amendments to Rule 45). First, a district court has subpoena power over witnesses that live or
work within 100 miles of the courthouse. Fed. R. Civ. P. 45(c)(1)(A). Second, a district court has
subpoena power over residents of the state in which the district court sits—a party or a party’s
officer that lives or works in the state can be compelled to attend trial, and non-party residents can
be similarly compelled as long as their attendance would not result in “substantial expense.” Fed.
R. Civ. P. 45(c)(1)(B)(i)–(ii). Third, a district court has nationwide subpoena power to compel a
non-party witness’s attendance at a deposition within 100 miles of where the witness lives or
works. Fed. R. Civ. P. 45(a)(2), 45(c)(1).

Relators contend that Defendants’ documents can be accessed electronically. (Dkt. No. 53 at 23–
24.) However, the Fifth Circuit has made clear that for purposes of this factor, the relevant inquiry
is the ease of access to where information is physically stored. Implicit v. Trend Micro, No. 6:16cv-00080, 2016 U.S. Dist. LEXIS 191571, at *5 (E.D. Tex. Sept. 1, 2016) (citing Volkswagen II,
545 F.3d at 316) (“Despite technological advances in transportation of electronic documents,
physical accessibility to sources of proof continues to be a private interest factor to be
considered.”). The Court is bound by this precedent despite its clear obsolescence.
5

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Defendants argue that this factor weighs in favor of transfer because: (1) none of the parties
reside within the subpoena power of this District; and (2) “it is assumed that knowledgeable
witnesses will be from Colorado, New York, and Knoxville, Tennessee” since Relators are
residents of Colorado and New York and Defendants are headquartered in Tennessee. (Dkt. No.
38 at 13–14.) “Relators, on the other hand, believe there are several witnesses in this district”
whose testimony could be compelled by this Court. (Dkt. No. 53 at 25.) These witnesses include
the following “emergency physicians: Terry Moslander, M.D., Jerry Jenkins, M.D., Carmen
Gonzales, M.D., Gene Kelly, M.D., Ricky Swaim, M.D.; and mid-level providers: Alex Lawrence
F.N.P.-C, Lorie Reeves, N.P., Kelly Hodge, N.P., and Judson Lawrence, M.S.N., R.N. F.N.P.”
(Id. at 25 (citing exhibit to John Stair deposition and Relator Hernandez’s declaration).)
The Court finds that this factor weighs against transfer. Defendants have failed to identify
any witnesses whose testimony could be compelled by the transferee forum whereas Relators have
identified several witnesses who would be subject to this Court’s subpoena power. See Godo
Kaisha IP Bridge 1 v. Intel Corp., No. 2:17- cv- 00676, 2018 WL 5728524, at *5 (E.D. Tex. Aug.
29, 2018) (“[T]he party seeking transfer bears the burden of demonstrating and identifying
unwilling witnesses that would benefit from the transfer.”).
c. Cost of Attendance for Willing Witnesses
“The convenience of the witnesses is probably the single most important factor in a transfer
analysis.” In re Genentech, Inc., 566 F.3d 1338, 1342 (Fed. Cir. 2009) (applying Fifth Circuit
law). “When the distance between an existing venue for trial of a matter and a proposed venue
under §1404(a) is more than 100 miles, the factor of inconvenience to witnesses increases in direct
relationship to the additional distance to be traveled.” Id. at 1343 (citing Volkswagen II, 545 F.3d
at 317).

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Defendants argue that the Eastern District of Tennessee is more convenient for its
witnesses: (1) Paula Dearolf, Executive Vice-President of Revenue Cycle Operations at HCFS; (2)
Joe Carman, Chief Administrative Officer of HCFS; (3) Hamilton Lempert, Chief Medical Officer
of Coding Policy; (4) Kelli Kirkendall, Vice President of Clinician Documentation Education; and
(5) Chris Murrell, Vice President of Akron Billing Center. (Dkt. No. 38 at 13.) Defendants explain
that “[o]ther than Chris Murrell, who is located in Akron, Ohio, these witnesses are located or
regularly appear in Knoxville, Tennessee.” (Id.) As such, “the cost to have Defendants’ witnesses
. . . appear in the Eastern District of Texas [is] prohibitive and unnecessary” and it would be more
convenient to litigate the case in Tennessee. (Id.)
In contrast, Relators provide that this District is more convenient for their witnesses: (1)
Dr. Robert Frantz, who is located in Moore, Oklahoma and “responsible for the operations of the
emergency medicine and hospital medicine operations in the TeamHealth West Group;” (2) Dr.
Matt Ledges who “provided instructions and oversight to Relators in a TeamHealth-affiliated
emergency department” in Denver, Colorado; (3) Dr. Alix Gilman, who served as a TeamHealth
Regional Medical Director (“RMD”) in Dallas, Texas from October 2013 to May 2014; (4) Dr.
David Pelini, who served as a TeamHealth RMD in Houston, Texas from 2015 to 2017; (5) Dr.
Joseph Kim, who served as a TeamHealth RMD in Dallas, Texas from 2015 to 2016; (6) Dr. Chris
Lagan who served as a TeamHealth RMD in Houston, Texas from 2013 to 2015; (7) James
Gulliver, who is based in Houston, Texas and responsible for recruiting emergency physicians in
Longview, Texas, and (8) a host of other non-party witnesses located in various states that Relators
contend are closer to this District than Tennessee. (Dkt. No. 53 at 26–27.)
The Court finds this factor is neutral as both parties have identified several witnesses for
whom the competing forums are respectively more convenient.

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d. All Other Practical Problems
Practical problems include those that are rationally based on judicial economy.
Particularly, the existence of duplicative suits involving the same or similar issues may create
practical difficulties that will weigh heavily in favor or against transfer. Eolas Techs., Inc. v. Adobe
Sys., Inc., 6:09-cv-446, 2010 WL 3835762, at *6 (E.D. Tex. Sept. 28, 2010), aff’d In re Google,
Inc., 412 Fed. Appx. 295 (Fed. Cir. 2011) (applying Fifth Circuit law).
Defendants “believe[] that [the first three] factors . . . are subsumed in demonstrating ease,
expeditiousness and reduction of costs,” and that “[it] would . . . make it more economical to
transfer the case to the forum where the alleged actions have occurred or from which they
emanated.” (Dkt. No. 38 at 15.) Relators do not respond with any particular arguments and simply
state that this factor does not favor transfer. (Dkt. No. 53 at 28.) On balance, the Court finds this
factor neutral as neither party has provided any additional facts that would either weigh in favor
of or against transfer.
2. Public Interest Factors
a. Administrative Difficulties Flowing from Court Congestion
“To the extent that court congestion is relevant, the speed with which a case can come to
trial and be resolved may be a factor.” Genentech, 566 F.3d at 1347 (applying Fifth Circuit law).
Defendants argue that while certain statistical data shows that the median time to trial is faster in
this District, such data is not helpful because “it doesn’t break the matters down by case type and
otherwise” fails to factor in the mandatory seal provisions under the federal FCA. (Dkt. No. 38 at
15–16.) Relators argue that this factor weighs against transfer because “[t]he time from filing to
trial averages about 50% longer in the Tennessee venue than in this district.” (Dkt. No. 53 at 29.)

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Though the statistics vary slightly by source, this Court has consistently found that the
median time to trial in this District is several months faster than other venues. See, e.g.,
ContentGuard Holdings, Inc. v. Amazon.com, Inc., 2:13-cv-1112, 2015 WL 1885256, at *10 (E.D.
Tex. Apr. 24, 2015); ContentGuard Holdings, Inc. v. Google, Inc., No. 2:14-cv-61 (Dkt. No. 38)
(E.D. Tex. Apr. 16, 2014) (“The six-month difference in median time, though not substantial, is
not negligible.”). Accordingly, the Court finds that this factor weighs against transfer.
b. Local Interests of Various Forums
Defendants argue that the Eastern District of Tennessee has a strong interest in this case
because any alleged schemes would have emanated from Defendants’ headquarters in Knoxville,
Tennessee. (Dkt. No. 38 at 16.) Relators argue that this factor is neutral given that Relators’
allegations are nationwide and not tied to any specific state. (Dkt. No. 53 at 29.) The Court agrees
with Relators and finds this factor neutral.
c. Avoidance of Unnecessary Conflicts of Law
Defendants submit this factor is neutral, (Dkt. No. 38 at 16), and Relators provide no
alternative argument (Dkt. No. 53 at 30). The Court does not anticipate any conflicts of law issues
that would favor or disfavor one district over the other. Accordingly, this factor is neutral.
d. The Familiarity of the Forum with the Governing Law
Defendants state that this factor is neutral, (Dkt. No. 38 at 16), and Relators present no
alternative arguments, (Dkt. No. 53 at 30). Given the high volume of FCA cases filed in this
District relative to Tennessee, the Court finds that this factor weighs slightly against transfer. (Dkt.
No. 78 at 102:22–103:4.)
On balance, the Court finds that Defendants have failed to sufficiently move the scales in
a manner adequate to show that the transferee forum is “clearly more convenient.” Volkswagen

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II, 545 F.3d at 315. Accordingly, the Court declines to transfer the case to the Eastern District of
Tennessee under § 1404(a).
.
III. CONCLUSION
Based on the foregoing, the Court hereby DENIES Defendants’ Motion to Dismiss
Relators’ First Amended Complaint Based on Improper Venue Pursuant to Fed. R. Civ. P.
12(b)(3), or in the Alternative, to Transfer Venue, (Dkt. No. 38). It is further ORDERED that
Relators are granted leave to amend the complaint to add Health Care Financial Services, LLC as
a co-defendant to the above-captioned case within 30 days of the issuance of this Order.
So ORDERED and SIGNED this 21st day of August, 2019.

____________________________________
RODNEY GILSTRAP
UNITED STATES DISTRICT JUDGE

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